Manapouri Power Station. Of the six big energy companies, Contact, Mercury and Meridian have usually had the largest margins. Photo: 123rf
New data from the Electricity Authority shows the millions of dollars that electricity gentailers are making from what some commentators say is a broken market.
The new dashboard indicates that the big six energy companies have consistently made more than $70 million in margins across the weeks for which data is displayed.
The week before Associate Energy Minister Shane Jones accused the companies of "profiteering" as wholesale prices soared, they had a margin of $119m.
Contact, Mercury and Meridian have usually had the largest margins.
The authority said this would not include costs like staffing, maintenance, debt servicing and levies.
Sarah Gillies, chief executive of the Electricity Authority said it was the start of a series which would give consumers much clearer visibility of which generators were doing well out of the electricity market each week and how New Zealand maintained security of supply.
"The wholesale market is very complicated and at the moment it is unusually volatile. In times of scarce hydro supply, New Zealand is reliant on coal and gas to keep the lights on. That is reflected in the data. As more and more data come into the dashboard it will start to show a picture of how the market is working and reflects the different fuel sources," she said.
The data in the dashboard is based on figures provided by the generators to the Electricity Authority, and then a standard formula was used to generate an indicative energy margin for the week for each of the six companies modelled.
"As the wholesale market works on half-hourly basis this isn't 'live' data, but it will bring an additional level of transparency," Gillies said.
"With the fuel shortages we have been experiencing there have been some large price spikes in the market, and this information will give more information about generator energy margins."
Nick Haines, chief financial officer of The Energy Collective, said the trend of the past two years had been for gentailers to make increasing profits from generation and little from retail, which put pressure on competition.
"Certainly, from what we're seeing in the market we expect wholesale earnings to continue to rise."
He said retailers were concerned about how market settings had evolved and the impact on businesses and households.
"In our view the market is broken, current market settings incentivise the generators to keep the generation balance really lean."
He said other generators would probably mirror Contact's strong profit reported on Monday for the year to June.
"No doubt a number of generators will probably report record dividends as well. It comes back to a split between the amount of cash going into renewable generation versus going back to shareholders as dividends. There's a lot of commentary about the sector needing to keep the generation pipeline very balanced and lean - that leanness results in the sector being able to generate strong profits."
But Electricity Retailers Association chief executive Bridget Abernethy said it was not so straightforward.
She said the gentailers were "tipping their profits back into renewable investment" and were the ones doing the "heavy lifting" to improve the situation,
"We say across our members there's about $6 billion committed between now and 2030, some happening this year, some 2025.
"We've got a regulator we've got faith in that does a lot of monitoring... The complaints from smaller or independent retailers - I think all of those have been well heard and by the regulator as well."
She said more context was needed to understand the dashboard numbers.
She said gentailers were reinvesting for the long-term and the figures did not fully explain the situation.
By excluding things such as tax, transmission costs, depreciation and operational expense costs, these figures did not show the gentailers' long-term commitment to powering New Zealand through the transition to an electrified economy powered by renewable generation, she said.
Other costs were also not reflected in the profit margin figures, such as the market-making function where generators are required to buy or sell NZ electricity futures on the ASX.
Some generators say this requirement has been costing millions of dollars a week, as Australian speculators take advantage of requirements in order to profit from scarcity in the market.
"ERANZ again welcomes the EA's assessment of the wholesale market but also believes the recent deals between Methanex and Contact and Genesis Energy, releasing much-needed gas for electricity generation, as well as the 20-year deal Meridian recently announced with the Tiwai Point smelter delivering 185MW into the system, demonstrate the sector's ability to navigate times of fuel scarcity."
